The word “deregulation” has been steadily degraded over the last two decades. Like the word reform, it is both overused and overly abstract.
Earlier this month Malcolm Turnbull’s Department of Communications released a discussion paper on the way the government manages the radiofrequency spectrum.
The paper has received little attention. That’s not a surprise. Spectrum governance is about as interesting and accessible as how the tax office calculates franking credits.
But what’s being proposed is rather radical and incredibly important – a move away from the Soviet-style command-and-control regulation of spectrum to market-orientated governance.
It is, in other words, the sort of deregulation that the government is going to have to pursue if it wants to be remembered as a reforming government.
Spectrum is one of the economy’s most valuable assets.
We need spectrum for everything from broadcast television to mobile internet access.
The services and technologies that rely on spectrum add billions to the Australian economy. One British estimate of the economic value add of spectrum in that country was AU$90 billion.
Yet for all its economic significance we regulate and control it in an incredibly retrograde way – through central planning and government allocation.
Think of spectrum a little bit like land. There’s a limited amount of it, but it can be divided up almost infinitely and used in different ways.
And of course, some ways are better value than others. We’re using spectrum more efficiently than we used to (the spectrum that once could only fit one broadcast television channel can now fit many) but we’re also demanding more of it as new technologies are adopted.
The Australian Communications and Media Authority (ACMA) dictates how spectrum is allocated – which parts are used by broadcasters, which are free for domestic uses like WiFi, which parts are for military or law enforcement use.
Nobody seriously suggests that ACMA allocates spectrum efficiently – that is, to its best use. And basic economics tells us that inefficient resource allocation is an unnecessary burden on the economy, on long term growth, and ultimately on our living standards. And it slows the spread of new technologies.
Indeed, it is the government’s tight control of spectrum which has kept the entire broadcast sector so farcically protectionist. This archaic system of spectrum allocation is why there is so much rent-seeking and crony capitalism in broadcasting.
The commercial television broadcasters have long lobbied against a fourth television network which would undercut their profitability. When broadcasting moved from analogue to digital, the government gave away masses of spectrum to the existing broadcasters – shirking this once-in-a-century opportunity to inject some competition into the sector.
If you’re unhappy with the quality of commercial television in this country, well, blame the government’s spectrum protectionism.
Likewise, centralised spectrum management gives the government a stick to control the free speech of broadcast media. All those hapless ACMA investigations into Alan Jones are based on a threat – however distant – that station broadcasting licenses might be revoked.
Turnbull’s discussion paper raises a number of proposals to simplify spectrum management.
But the most important is number 8, under the rather bland title “Facilitate greater user involvement in spectrum management”.
Under this proposal, ACMA would devolve spectrum management to users and private spectrum band managers.
Users and private firms would decide how spectrum was allocated, the rules under which it was used, figure out pricing mechanisms, and they’d adjudicate disputes. ACMA would be reduced to a spectrum watchdog.
Imagine band managers with a financial incentive to allocate spectrum to the highest value. This would be a big step towards treating spectrum like an economic asset like any other.
Eventually the vast bulk of ACMA’s regulatory apparatus should be replaced by a property rights based spectrum regime. In other words, the market would decide how spectrum is allocated.
The idea that the market could allocate spectrum better than government planners is an old one in the history of economic thought.
The economist Ronald Coase won his 1991 Nobel Prize for a program of work that begun with an examination of how the Federal Communications Commission in the United States prevented the efficient allocation of spectrum.
A paper commissioned and published by ACMA itself in 2007 acknowledged some benefits of granting property rights in spectrum – not least in reducing the inefficiencies caused by command-and-control allocation.
And we’ve been inching towards a property rights based spectrum regime over the last few decades.
The government has been allocating some spectrum licences through competitive auctions since the early 1990s. The Gillard government’s Convergence Review called for “a market-based pricing approach” for all spectrum, broadcast and non-broadcast. And the Communications Department is trying to figure out how to create deeper secondary markets in spectrum trading.
In other words, fully embracing the property rights model of spectrum management would be reform in the direction we are already travelling.
The Abbott government has trumpeted loudly its deregulation and red tape reduction agenda. But it’s likely that the real reforms will come outside those highly publicised “repeal days”.
Government spectrum management dates back to the Wireless Telegraphy Act 1905, when the Commonwealth decided it wanted absolute control over the new communications technology.
That makes spectrum control one of the oldest and most stubborn regulatory constructs in Australian history.
For more than a century it has been a burden on the economy, a handbrake on the adoption of new technologies, and a weapon for suppressing free speech.
Deregulating spectrum might be one of the most important things the Abbott government could do.